When trying to figure out who benefits from the new housing law, don't forget to count seniors who are in the market for a reverse mortgage. These mortgages let seniors convert some of their home equity into a stream of income, a line of credit or a lump sum. The money does not have to be paid back until the last borrower sells or dies. For retirees who are house-rich but cash-poor, the new law offers some significant changes.
Homeowners age 62 and older will now be able to tap a greater amount of their home's equity. The maximum lending limit for a reverse mortgage has been upped nationwide to $417,000. That flat limit replaces the old rule that set limits from $200,160 to $362,790 depending on where the borrower lived.
Even better is a reduction in the costs for these loans. "People are pretty satisfied with the reverse mortgage product, but the biggest barrier is the high cost," says David Certner, AARP's legislative counsel and legislative policy director. Under the old law, the more valuable your home and the more equity you tap, the higher the fee could climb because lenders' fees were capped at 2% of the maximum amount of the reverse mortgage.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But with the new law, origination fees are reduced to 2% on the initial $200,000 and 1% on the remaining balance, with a cap of $6,000. (This cap is subject to future inflation adjustments.) So let's say you take out a $400,000 reverse mortgage. Under the old law, you would have paid an $8,000 fee. Under the new law, the fee drops to $6,000.
Seniors also gain protections from predatory sales practices. Originators of reverse mortgages will be prohibited from selling other financial and insurance products. Plus, the new law bans tying the purchase of annuities, insurance and other financial products to taking out a reverse mortgage. To learn more about practices to watch out for in the reverse-mortgage market, read Reverse Mortgage Abuse on the Rise.
-
457 Plan Contribution Limits for 2025Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025 than in 2024.
-
Medicare Basics: 11 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
Six of the Worst Assets to Inheritinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2024 and 2025SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 in 2024 and $70,000 in 2025..
-
Roth IRA Contribution Limits for 2024 and 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
SIMPLE IRA Contribution Limits for 2024 and 2025simple IRA The SIMPLE IRA contribution limit increased by $500 for 2025. Workers at small businesses can contribute up to $16,500 or $20,000 if 50 or over and $21,750 if 60-63.
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
-
Roth 401(k) Contribution Limits for 2025retirement plans The Roth 401(k) contribution limit for 2024 is increasing, and workers who are 50 and older can save even more.
